Protect your construction projects with builder’s risk insurance

Builder’s risk insurance is coverage that provides protects your construction project while work is underway. It helps safeguard the job you’re working on, as well as your materials and equipment.

Construction projects demand a lot of time, money and expertise. As a general contractor, your job site deserves protection. That’s where contractor insurance comes in. It provides basic coverage with optional add-ons you can tailor to your business. And builder’s risk insurance is a key component.

Here, we’ll break down what a builder’s risk policy covers so you can keep your business on track—no matter what comes your way.

Builder’s risk insurance is a kind of property insurance that provides protection against property damage that can occur during the construction of residential, commercial, institutional, agricultural and industrial buildings. It’s a valuable tool for contractors of all sizes.

Contractor insurance can also include optional coverage, such as:

• Commercial general liability insurance (CGL insurance)
• Property in transit insurance
• Property coverage for your tools and equipment

There are two different ways you can get builder’s risk insurance, and each one plays a specific role.

A blanket builder’s risk policy can cover all of your company’s construction sites. Expected start and end dates for each project aren’t required. It’s something to consider if you run multiple projects at the same time, tend to complete at least two $350,000+ jobs each year and have annual revenue above $1,000,000.

A project-specific builder’s risk policy, on the other hand, is a one-off policy for a single construction project. You might consider this type of coverage for projects that are forecast to cost more than the insurance limits of your blanket policy. The nice thing about a project-specific policy is that it can be customized to meet the needs of a specific job. And the premium is based on the details of just that one job. If the project is put on hold for more than a month, though, the coverage ends automatically.

All risk builder’s insurance, also known as broad form builder’s insurance or course of construction insurance, helps protect your construction site. It can cover materials, equipment, property and work in progress against theft, vandalism, fire and collapse (when caused by a covered peril). Think of it as a safety net designed to protect your work.

Wrap-up liability coverage protects the liability of everyone involved in the project—general contractors, subcontractors, and others—if they cause bodily injury or property damage to a third party. This is often required for larger construction jobs, like high-rises and infrastructure projects, because it helps simplify risk management for everyone involved.

To choose the right coverage, it helps to take a step back and look at your business’s needs. Ask yourself:

• What kinds of projects do we take on?
• Where are our sites located?
• Which risks do we face most often?

In addition to property insurance, which covers material damage, and liability insurance, which offers protection if a lawsuit is filed by someone who has suffered material or bodily injury, there are a few other important protections to you may want to think about:

• Contractor’s equipment, tools and portable equipment insurance can help cover direct material loss or physical damage to things like saws, lasers, air nailers, generators, spare parts and other gear you use on site.
• Completed operations hazard coverage can help if something goes wrong after you’re done with the project. It’s typically part of a standard commercial general liability or CGL policy.

Having the right coverage at the right price gives you peace of mind. But before you buy, be sure to:

• Make a list of all your equipment (including rentals) and reassess on a regular basis.
• Take a realistic look at the total value of your project. Your coverage should match the actual cost of the job, including things like subcontractor costs and some of the admin fees associated with running the project. Though it might be tempting to underestimate the value to bring your premiums down, that could leave you underinsured if something goes wrong.
• Look closely at how long your coverage is for and what the exclusions are.
• Ask your subcontractors for proof of general liability insurance and professional liability insurance, if applicable. The latter is also called errors & omissions insurance (E&O). The point of this is to help make sure you’re not held responsible for something that isn’t your fault.
• Update your insurance policy whenever there are changes to your project. A lot can change along the way!
• Prioritize site safety to lower your risk.
• Don’t forget about vacant land and storage sites. They need protection too.

Builder’s risk typically covers what are known as hard costs. These are direct, physical expenses. Soft costs, which are indirect, non-physical expenses, are typically covered by an endorsement. Hard costs include:

This covers things like losses or damage to the structure while the work is ongoing.

This covers things like lumber, siding, tools, machinery and even temporary structures.

This offers protection if materials are stolen from a warehouse or damaged during delivery, for example.

This offers protection against these unexpected issues, which are fairly common on job sites and can end up increasing costs.

Common exclusions in builder’s risk insurance include manufacturing errors, preexisting defects, delivery delays and negligence.

The cost of builder’s risk insurance depends on a lot of factors, including the type of construction, the insured amount, the location of the project and how long the work will take. For example, you’ll probably pay a higher premium if you’re insuring a month-long project in an urban area where the risk of vandalism is higher.

On average, the cost of a blanket builder’s risk insurance policy can range from $79 to $250 a month. If you’re looking at a project-specific policy, prices could range from $833 to $2,500.¹ This estimate is based on the profile of a contractor with $2,000,000 in liability coverage and expected annual income of $1,000,000.

While builder’s risk insurance isn’t usually required by law, it is highly recommended and can be required:

Most financial institutions ask for builder’s risk insurance when financing construction projects.

Clients and project owners can stipulate in their contracts that the general contractor has to take out builder’s risk insurance and maintain the coverage for the duration of the project.

Builder’s risk insurance is standard practice for public civil works projects.

Builder’s risk insurance is important because it lets you move forward without having to worry about what could go wrong. The right builder’s risk policy can help you:

• Stay on schedule, even when unexpected issues arise
• Recover financially if materials, tools or equipment are damaged or stolen

At the end of the day, builder’s risk insurance is about protecting the future of your construction projects. It helps you reduce the risk of financial losses and gives you and an extra layer of safety. It’s peace of mind that can go a long way.

Ready to take the next step? You can get an insurance quote or double-check your current coverage before your next project kicks off.

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¹ Subject to change. Cost estimates provided for information purposes only.

The information on this page is provided for information purposes only. The clauses and conditions related to the coverages described are set out in the insurance contract, which prevails at all times.

Conditions, limitations, and exclusions apply.

Desjardins Insurance refers to Desjardins General Insurance Inc., the provider of auto, home, and business insurance products.